Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. bonds often pay a coupon twice a year. for the val

Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual...

60.1K

Verified Solution

Question

Finance

Bonds often pay a coupon twice a year. For the valuation ofbonds that make semiannual payments, the number of periods doubles,whereas the amount of cash flow decreases by half. Using the valuesof cash flows and number of periods, the valuation model isadjusted accordingly.

Assume that a $1,000,000 par value, semiannual coupon USTreasury note with four years to maturity has a coupon rate of 4%.The yield to maturity (YTM) of the bond is 7.70%. Using thisinformation and ignoring the other costs involved, calculate thevalue of the Treasury note:

a) $1,049,602.92

b) $874,669.10

c) $551,041.53

d) $743,468.74

Based on your calculations and understanding of semiannualcoupon bonds, complete the following statement:

When valuing a semiannual coupon bond, the time periodvariable(N) used to calculate the price of a bond reflects thenumber of periods remaining in the bond’s life.

Answer & Explanation Solved by verified expert
3.9 Ratings (585 Votes)
    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Physics
1.2K views

The wave number of the spectral line in the emission spectrum of hydrogen will be...

Finance
1.2K views

Consider the following balance sheet (in millions) for an FI: Assets Liabilities Duration = 10 years $950 Duration...

Physics
1.2K views

In a double slit experiment light of wavelength 750 nm and 900 nm illuminates the...

Geometry
1.2K views

Ground anchor 2 is exactly 58 feet from the base of the tower dashed line...

Geometry
1.2K views

Transportation Health 120 182 108 OA 3 29 2 96 B 2 75 3 24...

Geometry
1.2K views

Question 31 Find the midpoint of the line segment joining the points 1 2 and...

Accounting
1.2K views

The following is information for Palmer Co. 2017...

Accounting
1.2K views

needing help with the journal part that is in the green area

Accounting
1.2K views

Reddy Company has the following cost formulas for overhead

Accounting
1.2K views

Chapter 7- Take-Home Assignment Question 2.) Bank Reconciliation Step 1: Identify...

Finance
1.2K views

1. As a sales professional in a telecommunications company, Ali's performance is reviewed and evaluated...

Finance
1.2K views

For each of the following compute the present value (Do not round intermediate calculations and...